How to Determine If I Can Qualify for a Mortgage
- 1). Count the number of months or years that you have been at your job. In most cases you have to have been employed at the same stable job for two years or more in order to qualify for a mortgage loan.
- 2). Order a copy of all of your credit reports (AnnualCreditReport.com) and your credit score (MyFico.com). See if you have any delinquent accounts; if so, you will need to clear these up in order to qualify for and close a mortgage loan. Generally, lenders like to see a credit score of at least 620. A score of 720 or more is ideal.
- 3). Check your debt-to-income ratio. This is your total monthly debt cost (including credit cards, student loans and other installment loans) divided by your monthly gross income. The rule of thumb is that 28 percent or less of your gross income should go toward your housing payments (called the front-end ratio) and 36 percent or less of your income should go toward all of your debt combined (back-end ratio) in order to qualify for a standard home loan.
- 4). Determine if you have 20 percent to put down on the home purchase. Some banks will allow less of a down payment (about 10 percent to 15 percent) but to be safe you should have 20 percent of the estimated price of homes that you can afford in the bank. (See the Resources section below for a tool to help you determine how much you can afford.)
- 5). Call a lender if you meet all of these requirements to get a pre-qualification for a home loan. You can then start visiting real estate agencies to shop for a home.